“It probably isn’t,” Collins said. “But if enough companies run into trouble, risk could be repriced and access to credit could dry up.”

While PGIM Fixed Income is reducing its exposure to industrials, the strength of the financial sector is a positive for the U.S. economy. Banks and consumers are in “great shape,” Collins said, compared to the last cycle.

There “won’t be a 2008,” he added. That sentiment was confirmed yesterday by Fed Chairman Powell.

Collins isn’t predicting a recession, but he does believe two of the most interest-rate-sensitive sectors of the economy, auto and housing sales, have peaked. Sales of all automobiles crested at 18 million a few years ago, and housing starts have tripled since the bottom of the last recession.

Wages have been rising at a 3 percent clip, while housing prices have been climbing at a 6 percent rate. With mortgage rates now approaching 5 percent, it’s not surprising affordability is becoming a serious headwind. Compounding the problem in many pricey housing markets is the reduction in SALT deductions to $10,000, which virtually eliminates the biggest tax break for many middle- and upper-middle-class Americans.

Others like Northern Trust chief investment officer Robert Browne have argued there is less than a 20 percent chance of a recession in the next five years even though he expects more than a few industries and regions to experience their own downturns during that period. “We might not have a recession,” Collins says. “But growth could run near 1 percent for several years with asset price corrections and a quarter or two of negative growth.”

First « 1 2 » Next